[Asia Economy Reporter Bu Aeri] On the 6th, the Financial Supervisory Service (FSS) announced that it will strengthen supervision over governance by promoting regular meetings with bank holding companies and banks.
The FSS revealed its 2023 work plan on the same day, explaining that it plans to enhance the functions of bank boards of directors by strengthening communication between supervisory authorities and boards, and conducting on-site inspections of board operations.
It intends to regularize direct communication between supervisory authorities and bank boards and support board decision-making by sharing awareness and information on recent financial market issues and bank-specific risk vulnerabilities through meetings. The FSS plans to hold at least one meeting annually with each bank.
It will also conduct thorough on-site inspections regarding the appropriateness of bank board composition and whether the board’s monitoring function over management is operating effectively.
Additionally, the FSS will examine the appropriateness of executive compensation systems in banks and review improvement measures related to the operation of the "business division system," which encompasses the authority and responsibility scope of financial group business division heads and decision-making procedures within business divisions.
To prevent unqualified major shareholders from entering the private equity management business, the FSS plans to check changes in major shareholders and establish measures to verify the eligibility of newly entering major shareholders.
Furthermore, to enable outside directors of holding companies to actively participate in key governance issues, the FSS will hold topic-specific meetings and enhance awareness of outside directors’ roles and responsibilities through workshops for newly appointed outside directors.
The FSS will also inspect joint investments among financial group affiliates. Joint investment refers to two or more affiliates within a financial holding group investing together in specific assets through mutual consultation.
The FSS plans to inspect management procedures at each stage of joint investment, including investment decision-making, execution, and post-investment management, and will prepare joint investment risk management guidelines through consultations with the industry.
Moreover, the FSS will promote strengthening internal controls to prevent recurrence of financial accidents in the financial sector, such as employee embezzlement.
The FSS will check the implementation status of the sector-specific internal control innovation plan announced last November and guide its execution by financial companies.
It also plans to expand the evaluation weight of internal control in management performance assessments and reform the system by specifying evaluation criteria within the first half of this year.
In addition, the FSS will establish a timely response system for financial accidents by conducting on-site inspections of large-scale financial accidents and preparing countermeasures for new types of financial accidents, maintaining continuous readiness.
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